Greetings, Overseas Oligarchs and Corporations! Please Come and Litigate Against the UK for Vast Sums.

How do you reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Advent of Shadow Courts

Today, overseas companies, and the oligarchs behind them, can sue elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, including companies headquartered in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but money the panel members determine the company would perhaps have made. The state might be compelled to rescind the measure. It will be deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as firms learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? National sovereignty and democracy are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the choices taken by legislatures is that this clause has been inserted – absent public approval, and typically amid conditions of total confidentiality – within international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice ruled that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the permission the former government had granted. Currently, this victory faces being overturned by an offshore tribunal reporting to exclusively the entities filing the suit.

During August, a company whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to proceed. We have little idea how much this might be. Which individual is representing it challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it appears probable that he will utilise the tribunal to contest the sanctions the UK levied against him after the Russian aggression. He has initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: equivalent to half of government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that such things could not occur. Years ago, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this issue accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That prediction has come to pass. Recently, energy and mining firms have lodged a historic level of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP